PRG-SCHULTZ USA, INC. v. GOTTSCHALKS

The opinion of the court was delivered by: MAXINE CHESNEY, District Judge

ORDER GRANTING DEFENDANT'S MOTION TO TRANSFER VENUE; VACATING
HEARING

Before the Court is defendant Gottschalks, Inc.'s
("Gottschalks") motion, filed September 14, 2005, to transfer the
above-titled action from the Northern District of California
("Northern District") to the Eastern District of California
("Eastern District"), pursuant to 28 U.S.C. § 1404(a). Plaintiff
PRG-Schultz USA, Inc. ("PRG") has filed opposition to the motion,
to which Gottschalks has replied. Having considered the papers
submitted in support of and in opposition to the motion, the
Court finds the motion appropriate for decision without oral
argument, see Civil L.R. 7-1(b), and hereby VACATES the hearing
scheduled for October 21, 2005. For the reasons set forth below,
the motion is GRANTED.

BACKGROUND

In the instant action, PRG seeks damages for breach of a
written agreement, entered into June 24, 2003 ("Audit Agreement"), by which PRG
agreed to perform an audit of Gottschalks' store real estate
leases in exchange for thirty to thirty-five percent of all
monies recovered, credits received, or savings recognized from
the audit. (See Compl. ¶ 1.) PRG alleges that although
Gottschalks has recovered payments from its landlords as a result
of PRG's audit, Gottschalks has failed to pay PRG all of the fees
owed to PRG pursuant to the parties' Audit Agreement. (See
id.)

PRG is a Georgia corporation with its principal place of
business in Atlanta, Georgia. (See Pitts Decl. ¶ 2.) PRG
alleges that it is in the business of recovery auditing, which,
it states, is the process of reviewing disbursement transactions
and related supporting data to identify and recover overpayments
and under-deductions. (See Compl. ¶ 2.)

Gottschalks is a Delaware corporation, with its corporate
headquarters located in Fresno, California.*fn1 (See
Bradshaw Decl. ¶ 2.) According to PRG, Gottschalks is a retail
department store chain with approximately 74 department stores
and 17 specialty stores located throughout California,
Washington, Alaska, Idaho, Oregon and Nevada. (See Compl. ¶ 3.)

PRG alleges that, pursuant to the Audit Agreement, PRG agreed
to conduct an audit of Gottschalks' store real estate leases in
order to determine whether Gottschalks had overpaid under any of
the leases. (See id. ¶ 8.) PRG further alleges that the Audit
Agreement entitled it to receive 30% of any recovery up to
$200,000, and 35% of any recovery over $200,000. (See id. ¶
11.)

PRG alleges it commenced the audit through its contractor,
Occupancy Cost Audit Group ("OAG"), in July 2003. (See id. ¶
14.) PRG further alleges that as a result of the audit performed
on the Lease Agreement for Manchester Center ("Manchester Center
Lease"),*fn2 Gottschalks recovered $7,151,045, of which
PRG's share, under the Audit Agreement, was $2,502,866. (See
id. ¶ 23.) PRG also alleges that Gottschalks recovered $333,476 in miscellaneous overcharges relating to other
leases,*fn3 of which PRG's share, under the Audit Agreement,
was $116,717. (See id. ¶¶ 17, 21, 23.)

On September 30, 2003, PRG alleges, Gottschalks's general
counsel served PRG with a 60-day cancellation notice of the Audit
Agreement. (See id. ¶ 19.) PRG further alleges that
Gottschalks, in the cancellation notice, stated that it intended
to honor the Audit Agreement and that it would compensate PRG
when and if it ultimately received compensation for the
overcharges identified by PRG. (See id.) PRG contends that
although it has sent Gottschalks repeated demands for payment,
Gottschalks has not paid PRG the amounts due PRG under the Audit
Agreement. (See id. ¶ 22.)

PRG asserts causes of action against Gottschalks for breach of
contract, breach of the covenant of good faith and fair dealing,
and an accounting.

LEGAL STANDARD

"For the convenience of parties and witnesses, in the interest
of justice, a district court may transfer any civil action to any
other district or division where it might have been brought."
28 U.S.C. § 1404(a). "Section 1404(a) is intended to place
discretion in the district court to adjudicate motions for
transfer according to an individualized, case-by-case
consideration of convenience and fairness." Stewart
Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988) (internal
quotation and citation omitted). In determining whether to
transfer venue pursuant to § 1404(a), the court may consider
factors such as "(1) the location where the relevant agreements
were negotiated and executed, (2) the state that is most familiar
with the governing law, (3) the plaintiff's choice of forum, (4)
the respective parties' contacts with the forum; (5) the contacts
relating to the plaintiff's cause of action in the chosen forum;
(6) the differences in the costs of litigation in the two forums;
(7) the availability of compulsory process to compel attendance
of unwilling non-party witnesses, and (8) the ease of access to
sources of proof." See Jones v. GNC Franchising, Inc., 211 F.3d 495, 498-99 (9th Cir. 2000).

DISCUSSION

Gottschalks seeks an order transferring the instant action to
the Eastern District, arguing that the Eastern District is a more
convenient forum than the Northern District.*fn4

A. The Case Could Have Been Brought in the Eastern District

As noted, a district "may transfer any civil action to any
other district or division where it might have been brought."
See 28 U.S.C. § 1404(a). It is undisputed that venue is
appropriate in the Eastern District, pursuant to
28 U.S.C. § 1391(a) and (c), because a substantial portion of the events
giving rise to the complaint occurred in Fresno, California, and
Gottschalks's corporate headquarters are located there. (See
Bradshaw Decl. ¶ 5(B).) Thus, the instant action "might have been
brought" in the Eastern District.

B. The Convenience of the Parties and Witnesses

Gottschalks submits evidence that it expects eleven current or
former employees to testify on its behalf concerning the Audit
Agreement, the Manchester Lease, Gottschalks's lease
administration, and the results of the audits conducted by PRG.
(See Bradshaw Decl. ¶ 4(A-K).) Of these witnesses, ten reside
in the Eastern District, and one, a former employee, resides in
Texas. (See id.) Additionally, Gottschalks identifies six
non-party witnesses it expects to testify. (See id. ¶
4(L-Q).) Two of those witnesses reside in the Eastern District,
three reside in the state of Washington, and one resides in
Alaska. (See id.)

PRG submits evidence that it expects to call at least three
current employees to testify about the negotiation of the Audit
Agreement and its enforcement. (See Pitts Decl. ¶ 7.) One of
those witnesses works for PRG in Atlanta; PRG does not identify
the residence or workplace of the other two employee witnesses.
(See id. ¶¶ 6-7.) PRG also expects to call three OAG
employees to testify about the audits done by OAG on behalf of
PRG. (See id. ¶¶ 9-11; see also Jacobson Decl. ¶ 4.) Of
the three OAG witnesses, one resides in southern California, and the other two work in southern
California and presumably reside there as well. (See Jacobson
Decl. ¶¶ 4-5.) Additionally, PRG expects to call a Los Angeles
attorney who represented U.S. Mall Holdings, the landlord of
Gottschalks's Manchester Center location, who is expected to
testify as to the amount recovered by Gottschalks from U.S. Mail
Holdings as a result of PRG's audit. (See Pitts Decl. ¶ 12.)

None of the potential witnesses identified by the parties is
located in the Northern District. Twelve witnesses, including two
non-party witnesses, are located in the Eastern District and
would not need to travel if the Court were to grant the motion to
transfer. The remainder of the witnesses are located distant from
both the Northern and Eastern Districts and would have to travel
if the case were litigated in either venue.

PRG's argument that transferring the case to the Eastern
District would merely shift the inconvenience from Gottschalks to
PRG is unpersuasive. Were the case to remain in San Francisco,
all witnesses would have to travel long distances to trial; it is
an inconvenient venue for all witnesses. By contrast, a transfer
to the Eastern District would eliminate the need for numerous
witnesses to travel, including two non-party witnesses.

Accordingly, the Court finds this factor weighs in favor of
transfer.

C. The Location Where the Relevant Agreements Were Negotiated
and Executed

Another relevant factor in determining whether to transfer
venue is "the location where the relevant agreements were
negotiated and executed." See Jones v. GNC Franchising, Inc.,
211 F.3d at 498-99. PRG attests that it executed the Audit
Agreement in Atlanta, and that Gottschalks executed the Audit
Agreement in Fresno. (See Pitts Decl. ¶ 3). Fresno, as noted,
is located in the Eastern District.

Accordingly, this factor weighs in favor of transfer.

D. The State That Is Most Familiar with the Governing Law

The second of the Jones factors is "the state that is most
familiar with the governing law." See Jones v. GNC
Franchising, Inc., 211 F.3d at 498-99. The parties do not
address this factor, and the Court notes that the Audit Agreement
does not include a choice of law clause. (See Pitts Decl. Ex. A.) As both the Northern District
and the Eastern District are equally familiar with California
law, and equally unfamiliar with the law of any other state,
however, this factor favors neither party.

E. The Plaintiff's Choice of Forum and the Contacts Relating
to the Plaintiff's Cause of Action in the Chosen Forum

The third and fifth of the Jones factors are "the plaintiff's
choice of forum" and "the contacts relating to the plaintiff's
cause of action in the chosen forum." See Jones v. GNC
Franchising, Inc., 211 F.3d at 498-99. Generally, the Court
accords special weight to the plaintiff's choice of forum and the
defendant "must make a strong showing of inconvenience to warrant
upsetting the plaintiff's choice of forum." See Decker Coal
Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir.
1986). The plaintiff's choice of forum is not a dispositive
factor, however, in considering a motion to transfer. See,
e.g., Stewart Organization v. Ricoh Corp., 487 U.S. 22, 31
(1988) (citing Norwood v. Kirkpatrick, 349 U.S. 29, 32 (1955)).
Indeed, a plaintiff's choice of forum is given "much less weight"
when the plaintiff is not a resident of the chosen forum or the
forum lacks any significant contact with the activities alleged
in the complaint. See William W Schwarzer, A. Wallace Tashima,
James M. Wagstaffe, Federal Civil Procedure Before Trial, § 4:761
(2005) (citing New Image, Inc. v. Travelers Indem. Co.,
536 F.Supp. 58, 59 (E.D. Pa. 1981) and Chrysler Capital Corp. v.
Woehling, 663 F. Supp. 478, 482 (D. Del. 1987)); see also
Bryant v. ITT Corp., 48 F.Supp.2d 829, 832 (N.D. Ill. 1999);
cf. Piper Aircraft v. Reyno, 454 U.S. 235, 255-56 (1981)
(holding, in discussing doctrine of forum non conveniens, that
plaintiff's choice of forum "deserves less deference" when
plaintiff has chosen not to sue in its home forum).

As noted, PRG is a Georgia corporation with its principal place
of business in Atlanta. (See Compl. ¶ 2.) There is no
allegation that any of the events giving rise to the instant
action took place in the Northern District. It is undisputed, on
the other hand, that much of the work PRG performed pursuant to
the Audit Agreement was performed in the Eastern District. (See
Bradshaw Decl. ¶ 5(B).) Consequently, the Court finds PRG's choice of forum is entitled
to little deference, and that the lack of contacts relating to
the plaintiff's cause of action in the chosen forum, coupled with
the existence of such contacts in the Eastern District, favors
transfer to the Eastern District.

F. The Respective Parties' Contacts with the Forum

The fourth of the Jones factors is "the respective parties'
contacts with the forum." See Jones v. GNC Franchising, Inc.,
211 F.3d at 498-99. There is no showing that PRG has any contacts
with the Northern District. Although Gottschalks has at least
four retail locations in the Northern District, in particular,
stores in Antioch, Danville, Santa Rosa, and Scotts Valley,
(see Oh Decl. ¶ 2 and Ex. A), there is no evidence that any of
Gottschalks's Northern California stores are involved in any way
in the instant litigation.

By contrast, it is undisputed that Gottschalks's corporate
headquarters are located in the Eastern District, and, as noted,
that much of the work PRG performed pursuant to the Audit
Agreement was performed in the Eastern District.

Accordingly, the fourth Jones factor weighs in favor of
transfer.

G. The Differences in the Costs of Litigation in the Two
Forums

The sixth of the Jones factors is "the differences in the
costs of litigation in the two forums." See Jones v. GNC
Franchising, Inc., 211 F.3d at 498-99. Neither party has
submitted any evidence that the cost of litigation will differ at
all, let alone significantly, depending on whether the instant
matter is heard in the Northern District or the Eastern District.
Accordingly, the sixth factor weighs in favor of neither party.

H. The Availability of Compulsory Process to Compel Attendance
of Unwilling Non-party Witnesses

The seventh of the Jones factors is "the availability of
compulsory process to compel attendance of unwilling non-party
witnesses." See Jones v. GNC Franchising, Inc.,
211 F.3d at 498-99. As noted, the parties have identified non-party witnesses
in the Eastern District, Texas, Washington, Alaska, and southern
California. The non-California witnesses are outside the subpoena
power of the Court and cannot be subpoenaed for trial regardless of whether the action is litigated in the Northern District or
the Eastern District. See Fed.R.Civ.P. 45((c)(3)(A)(ii). The
California witnesses are all within the subpoena power of the
Court and can be subpoenaed for trial in either the Northern
District or the Eastern District. See id.

Accordingly, this factor weighs in favor of neither party.

I. The Ease of Access to Sources of Proof

The final Jones factor is "the ease of access to sources of
proof." See Jones v. GNC Franchising, Inc.,
211 F.3d at 498-99. Gottschalks argues that the Eastern District is more
convenient because Gottschalks stores many of the pertinent
documents at its corporate headquarters and at the Manchester
Center location, both of which are located in the Eastern
District. (See Motion at 5; see also Bradshaw Decl. ¶
5(A).) PRG submits evidence that its records of payments received
by Gottschalks are maintained in southern California. (See
Jacobson Decl. ¶ 6.) The parties do not identify any documents or
other sources of proof that are located in the Northern District.

Neither party contends, however, that any of the relevant
records are so voluminous that it would difficult to transport
them as needed. See Reed Elsevier, Inc. v. Innovator Corp.,
105 F.Supp.2d 816, 822 (S.D. Ohio 2000) (noting that "location of
documents will rarely weigh in favor of transfer because
documents may be easily photocopied and shipped to wherever the
documents are needed").

Accordingly, this factor weighs in favor of neither party.

J. Administrative Difficulties Flowing From Court Congestion

The Ninth Circuit has identified "administrative difficulties
flowing from court congestion" as another factor relevant to
determining whether to grant a motion to transfer pursuant to §
1404(a). See Decker Coal Co. v. Commonwealth Edison Co.,
805 F.2d at 843. PRG points out that judges in the Eastern District
have a higher case load than judges in the Northern District, and
that cases take longer to get to trial in the Eastern District
than in the Northern District. (See Oh Decl. ¶ 3 and Ex. B). In
particular, in 2004, judges in the Eastern District had an
average of 895 cases per judge compared to 519 pending cases per judge in the Northern District, while civil
cases in the Eastern District took an average of 27.5 months to
get to trial, compared to 22.5 months in the Northern District.
(See id.)

Accordingly, this factor weighs against transfer.

K. Summary

In sum, the most probative of the factors discussed above weigh
in favor of transferring the instant action to the Eastern
District. The only factor that weighs in favor of denial is the
slightly longer average time for civil cases to get to trial in
the Eastern District. The Court finds that single factor is
outweighed, however, by the Eastern District's connection to the
events giving rise to the instant action and to at least one of
the parties, as well as many of the witnesses, and that there are
no contacts with or connection of any type to the Northern
District.

Accordingly, the Court finds that the relevant factors weigh in
favor of transferring the action to the Eastern District.

CONCLUSION

For the reasons stated above, Gottschalks's motion to transfer
the instant action to the Eastern District of California is
hereby GRANTED.

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